More than three years have passed since the onset of the 2008 financial crisis, and the economic downturn feels like it may never end. Optimism had run high that 2011 would see a sustainable economic upswing. But those hopes were dashed by a nasty combination of the euro zone debt crisis, spiking food and oil prices, persistent unemployment in the U.S. and Europe and the terrible tsunami that devastated northern Japan. The past year proved far more turbulent, uncertain and painful than most economists had predicted.

So here we are, at the start of 2012, facing the same question: Will this year finally, really, truly bring an end to the economic crisis, and a strong, meaningful rebound to growth, job creation and financial stability?

I hate to be the bearer of bad news, but, hey, I am a journalist after all, so what else would you expect? Though there are some reasons to be hopeful, I don’t think we’re out of the woods just yet. There is still too much uncertainty, too many problems left unresolved from the financial crisis, and too few tools in the hands of policymakers to act to support growth.

Sure, there are some bits of good news. The U.S. economy has been creating more jobs; the improved optimism can be seen in a strong holiday shopping season. Emerging markets like China appear to have kicked their inflation problem, allowing them to ease money and pursue faster growth, which is good for the global economy overall. But let’s not kid ourselves. There is no avoiding the reality that the bad news clearly outweighs the good, just about everywhere. We’ve got the continued debt crisis in the euro zone, biting austerity in the developed world, unhealthy and unreformed banks, political paralysis – do I need to go on? In fact, we may be farther away from recovery now than we were a year ago, with conditions frighteningly like those in place ahead of the 2008 meltdown. Here’s IMF Chief Economist Olivier Blanchard on this point:

We started 2011 in recovery mode, admittedly weak and unbalanced, but nevertheless there was hope. The issues appeared more tractable: how to deal with excessive housing debt in the United States, how to deal with adjustment in countries at the periphery of the Euro area, how to handle volatile capital inflows to emerging economies, and how to improve financial sector regulation. It was a long agenda, but one that appeared within reach. Yet, as the year draws to a close, the recovery in many advanced economies is at a standstill, with some investors even exploring the implications of a potential breakup of the euro zone, and the real possibility that conditions may be worse than we saw in 2008…Is all hope lost? No, but putting the recovery back on track will be harder than it was a year ago.

It’s no wonder that economists have been steadily lowering their growth forecasts for 2012. For example, Goldman Sachs, one bank that was relatively optimistic a year ago, has turned very negative. It expects global GDP to increase only 3.2% in 2012, down from 3.8% in 2011. The advanced economies, Goldman forecasts, will limp along at 1% growth in 2012, a sharp drop from 1.7% in 2011. The problem, says Goldman, is that we’re still digging ourselves out from the impact of the financial crisis three years ago:

The broader context of a post-bust recovery remains critical when assessing the medium-term outlook. The US and several other developed economies are still facing the headwinds of private-sector deleveraging and the drag from broader fiscal consolidation. That combination is likely to see another two years of sub-par growth in the major advanced economies, extending into 2013, and the continuation of high unemployment and spare capacity, alongside renewed disinflationary pressure.

Much of what happens to the global economy in 2012 will be determined by the euro zone. A consensus is building that the zone is headed for a full-blown recession. Goldman believes euro area GDP will shrink in 2012, by 0.8%. HSBC estimates a 1% contraction. All I can say is: Yuck. But what else should we expect? The European banking sector is struggling to fund itself and will need to be recapitalized – factors which make it likely credit will be curtailed. Governments just about everywhere are under pressure to cut back spending and close budget deficits, even though unemployment remains high in many places. Throw on top of that the continued uncertainty about the future stability of the euro itself, and the mix will inevitably be toxic for growth. And it could even be worse than forecast. Economists’ dire growth estimates are based on the assumption that the euro survives the year; if the monetary union unravels, the consequences would be even more severe. Here’s HSBC on that subject in a recent report:

Entering 2012, we are facing economic uncertainty on the grandest of scales…A break-up (of the euro zone) could trigger another great depression. There can be no doubt that policymakers now recognise this risk. That is good news. However, despite signs of greater urgency to deal with the problem, investors remain mostly unconvinced. This loss of faith is reminiscent of the collapse in confidence in 2008, when the wheels came off the global economy. Back then, forecasters completely failed to grasp the gravity of the situation. The same may be true today.

There is a clear link between Europe’s deteriorating growth and the chances of the euro’s survival. Europe is facing the risk of falling into a deadly downward spiral. Without growth, governments in countries like Greece, Italy and Spain will have a harder time closing budget deficits and controlling debt levels. That means policymakers will have to impose more harsh austerity measures to meet fiscal targets, which will suppress growth further, making more cuts necessary, and so on and so on. Public resistance to reform will only escalate as jobs vanish and incomes get squeezed amid the budget cutting. I fear for the social stability of Europe as this depressing story unfolds.

And as Europe goes, so will the global economy. Europe is a huge market for exports from the U.S. and Asia, and a recession there will dent the growth prospects of the rest of the world. An export revival for the U.S. has been a big factor holding up growth. Not only will the debt crisis in Europe limit the market for U.S. goods there, but it is unlikely that the euro will be able to maintain its surprising strength (the currency recently hit a 15-month low against the dollar). That means the greenback will appreciate and make American exports less competitive, softening U.S.growth prospects and potential job creation. If the debt crisis truly reaches a meltdown in Europe, dragging down European banks, the ripple effect on the American financial sector will damage the outlook even further.

So it is more important than ever that Europe’s leaders find ways to support the zone’s struggling economies. But that means we need to see much bolder political leadership. We need to get beyond the pledges and promises of endless euro zone summits and see some real implementation and action. I’m not hopeful here. I don’t see how Europe’s leaders can act decisively to save the euro when voters back home are increasingly resistant to heftier sacrifices. In the end, domestic political concerns will trump the needs of the euro, again and again. That means the fate of the global economy in 2012 will very much rest on the democratic politics of the West. The same can be said of the U.S. With a presidential election looming in November, it is hard to see Washington getting much done on matters like fiscal reform until after the American public has its say.

Even if Western politicians get their act together, their ability to combat slower growth is extremely constrained. With interest rates at incredibly low levels, conventional monetary policy is off the table; with investors worried about rising levels of sovereign debt, fiscal stimulus is an impossibility as well. So as growth stagnates and even tumbles, policymakers will be forced to sit on the sidelines and watch.

But we still have emerging markets to hold up global growth, right? Yes, the Chinese and Indian economies will continue to roar, but there are problems afoot in the developing world as well. Three main drivers of China’s growth – exports, housing construction and infrastructure development – are all facing headwinds. Europe’s problems, combined with tighter monetary conditions, are already taking a toll. China’s manufacturing PMIs have been weak in recent months, an indication that Chinese factories are on the downswing. Housing prices are slipping as well, another potential drag on growth. Policymakers look set to turn on the credit gravy train again, which will boost growth, but also add to the worrying debt problem eating away at the health of the economy. So China’s growth will continue, but the leadership is confronting stiffer challenges to keeping that growth going. Other emerging economies are even worse off. Russia, already struggling with anemic investment, now is contending with a political crisis.

All of this adds up to a 2012 potentially uglier than 2011. All eyes will remain fixed, first and foremost, on Europe and its debt crisis. The U.S.presidential election and the political turmoil in the Middle East, Russia and elsewhere will also be on watch. However 2012 plays out, we’re in for a very uncertain, and potentially wild, economic ride. Hold on.